Google, Microsoft, Palm Jockey in Smartphone Race

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In a flurry of announcements on Tuesday ahead of the holiday shopping season, the companies introduced new phones, wireless carrier partnerships and efforts to boost the availability of new applications for their phones.

In a flurry of announcements on Tuesday ahead of the holiday shopping season, the companies introduced new phones, wireless carrier partnerships and efforts to boost the availability of new applications for the phones.

The moves underscore the extent to which the smartphone market has emerged as a prime battleground encompassing a variety of technology businesses and one of the few markets experiencing rapid growth in a rough economic environment.

"Everyone wants to build up and bolster their smartphone portfolio, because that's what drives more dollars for the carrier and that's where the market is going," said Avian Securities analyst Matthew Thornton.

Google, the world's largest Internet search company, said it was teaming up with Verizon Wireless to co-develop multiple phones based on its Android operating system. They plan to bring two phones to market this year, and Verizon Wireless CEO Lowell McAdam said the partnership could result in the introduction of multiple devices per year going forward.

The partnership with Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc, is a boost for Google's efforts to gain a foothold in the smartphone market.

It caps a string of Android phone announcements, including Motorola Inc's recent introduction of the Cliq phone and HTC's Hero phone, slated for U.S. release next week.

Google does not charge a licensing fee for Android but hopes to benefit by serving highly targeted mobile ads to users.

Microsoft, whose software is used in the majority of the world's PCs, unveiled on Tuesday a new version of its smartphone software, Windows Mobile 6.5, and promised more than 30 new devices with the software would be available in more than 20 countries by year's end.

According to research firm IDC, smartphones running Microsoft software accounted for 11 percent of the worldwide market in the first half of 2009, compared to 11.7 percent share for Apple's iPhone and 19.9 percent share for Research in Motion's Blackberry.

Nokia's Symbian operating system had the largest share with 46.4 percent share.

IPHONE THE ONE TO BEAT

But analysts say that Apple's iPhone, despite its modest share of the market, is the product to beat.

"It may not be reflected in the numbers, but everyone is playing catch-up" with Apple, said C.L. King analyst Lawrence Harris.

In addition to the technological innovations ushered in by the iPhone, such as its multi-touch screen, Harris said that Apple is the clear leader when it comes to the software apps created by third-party developers to work with a smartphone.

Apple has 85,000 apps available through its iPhone Apps store.

"The fact that a particular app is available can help drive the purchasing decision," said Harris.

In a sign of how critical apps have become in the smartphone race, Microsoft also announced the launch of a new marketplace for Windows Mobile applications. And Palm announced it was making its "WebOS" smartphone software more open for outside developers to create applications.

Google said there are more than 10,000 free and paid apps available for Android smartphones.

Verizon Wireless and Google sought to play up the open nature of Android apps compared to the tight control that Apple exercises over its software.

The first Android phones from Verizon Wireless will support the Google Voice software application, which allows consumers to make low-priced international calls and which Apple has yet to approve for its iPhone.

"You either have an open device or not. This will be open and we expect to bring that application to market when we bring the first device out," said Verizon's McAdam, referring to Google Voice.

Google has said that Apple rejected Google Voice, while Apple contends it is still evaluating the software, in a high-profile spat that has attracted the attention of the U.S. Federal Communications Commission.

On Tuesday, AT&T Inc, which has the exclusive rights to the iPhone in the U.S., said it will allow third-party Internet telephone calls to be on the iPhone using AT&T's third generation network, reversing a previous position to ban such calls due to revenue concerns.

(Additional reporting by Franklin Paul and John Poirier; Editing by Derek Caney and Tim Dobbyn)